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Ignore Tesla: Here Are 3 Better Stocks

Tesla has been a huge outperformer, but its valuation is sky-high. Here are three other options for those worried about buying at the top.

I wouldn't bet against Tesla (NASDAQ:TSLA). In fact, as a Tesla shareholder, I'm actively rooting for the company and its bombastic founder, Elon Musk. But after an 879% share price increase over the last five years without a single positive earnings report, Tesla is looking more than a little overvalued right now.

If you can stomach the risk and you believe in Musk's vision, there are worse places for your money. But I have three stocks -- General Motors (NYSE:GM), Oshkosh Corporation (NYSE:OSK), and Republic Services (NYSE:RSG) -- that are better than Tesla for investors concerned about the fundamentals. And better yet, unlike Tesla, all three pay a dividend.

Tesla has rewarded investors with great returns. But at these levels, it might make sense to look for other stocks to buy. Image source: Getty Images.

If you're concerned about value

It's impossible to compare Tesla's valuation to other companies' using the standard price-to-earnings ratio, because Tesla has only reported positive quarterly earnings twice in the last five years. But if we look at another valuation metric -- enterprise value to EBITDA -- on a trailing-12-month basis, Tesla comes in at 243.6 (lower is better).

How about a car company that's currently trading at an EV-to-EBITDA ratio of 5.2 instead?

That company is General Motors, which not only achieved record earnings per share last year, but did so in a year when U.S. auto sales declined year over year for the first time since the Great Recession. Better yet for investors, the company is projecting further earnings growth in 2019 and 2020 after a flat 2018. Much of the credit goes to sales growth for GM's more lucrative pickups and crossover SUVs.

Given how well GM is doing, it's tough to understand why the market isn't placing a higher premium on the stock. I'm not complaining, though, because it gives investors a chance to buy into a good company at a bargain price.

If you're concerned about sales

One of Tesla's big issues has been production. The company's latest -- and so far most affordable -- electric vehicle, the Model 3, finally started rolling off the production line last June. But production has been plagued by delays, and Tesla can't sell cars it hasn't manufactured yet.

So why not invest in a company that is currently making plenty of vehicles and has locked in contracts for hundreds more? I'm talking about specialty truck-maker Oshkosh Corporation. Oshkosh makes vehicles like fire engines, cement mixers, and forklifts for municipalities and construction companies, but it's also a major defense contractor, with several lucrative Department of Defense contracts for light trucks.

Sales aren't a problem for Oshkosh. In Q1 2018, sales were up 31% year over year. Defense sales rose an astonishing 68% year over year. And Oshkosh is making plenty of money from those sales, reporting $0.74 in profits per diluted share. That was almost three times the company's per-share earnings from Q1 2017.

After February's market correction, Oshkosh's shares dropped and are currently down 13.3% for the year. This may be as good a time as any to pick up shares in a vehicle manufacturer that's already chugging along.

If you're concerned about the future

Buying Tesla stock means betting not on the company's present, but on the future that Musk envisions for the world -- a world in which Tesla's electric cars and solar energy-generating roofs are part of a radical reshaping of the energy grid. But if the future doesn't shape up the way Tesla envisions -- or if a competitor beats Tesla at its own game -- the company's investors stand to lose big.

You may feel safer investing in a company that has a more certain outlook. And one thing that's pretty certain is trash.

Given the growing global population, trash and trash disposal is an industry that will be around for a long, long time. Better still for investors, it's the kind of boring, slightly disgusting industry that master investor Peter Lynch counseled investors to look for -- the opposite of the hot, flashy Tesla.

There are plenty of waste-management stocks to consider, but right now, Republic Services looks like a solid bet for investors. The company finished 2017 with a great fourth quarter, seeing revenue rise 7.6% and earnings per share increase 7%. Full-year 2017 earnings per share were up an impressive 9.5%, beating even the high end of the company's guidance.

For 2018, the company is projecting a 27% increase in adjusted earnings, fueling $450 million in dividends and $775 million in share buybacks. Even better, the company's current P/E ratio of 17.8 looks cheap compared to main rival Waste Management's P/E of 27.9. And the two companies' dividend yields are nearly identical at about 2.1%.

Republic Services should continue to reward its investors regardless of what the future brings.

What a Fool believes

No stock is a sure thing, and sometimes what seems like a questionable, overvalued investment can surprise you with further explosive growth. But Tesla has already grown so far, so fast, that it makes sense to consider other companies with more reasonable valuations, established sales growth, and clear future plans. General Motors, Oshkosh Corporation, and Republic Services check those boxes and pay dividends to boot.

Does that mean you absolutely shouldn't buy Tesla? Not necessarily. If you believe in Musk's vision and think the company can execute it successfully, you may feel like Tesla is worth buying even at today's lofty valuations. But you'll probably also want to pick up some less risky stocks for your portfolio, just in case things don't turn out as planned for Musk & Co.

John Bromels owns shares of Oshkosh, Tesla, and Waste Management. The Motley Fool owns shares of and recommends Tesla. The Motley Fool recommends Republic Services. The Motley Fool has a disclosure policy.